Reform spells relief in more ways than one

Image courtesy of 401K via Flickr

Dear Cheasty, 

My question is the following: What if I am insured and I have my family on my plan. Because of this, my premium is high – very high – to where I am barely making my bills on time. Will there be a change in family plan insurance premiums with the health reform?

Sincerely,
Struggling to Make Ends Meet

 

Dear Struggling,

Boy, do I hear you. Millions of Americans are in exactly the same boat – insurance premiums so high that you either can barely afford to adequately insure your family, or you simply cannot do so. It’s this very situation that has brought about our current crisis in health care. In Texas, almost 25% of us have no insurance whatsoever, and many more of us are under-insured – meaning we have a policy, but the policy has strict limits on what it will cover, often leaving us with staggering medical bills in the event of an illness or accident.

The problems caused by the high cost of insurance leave us all vulnerable to financial and physical ruin when we do eventually get seriously ill, and need to call upon those policies we’ve been paying for. And as you pointed out, Struggling, even when we aren’t running up high medical bills, it can be extremely difficult to make ends meet and still hang on to our insurance plans.

So what will the Affordable Care Act (a.k.a., the health reform law) do to fix this situation?  Well, the ACA is tackling this problem in a variety of ways. Before I get started, however, I should emphasize that the main goal of the ACA is to expand coverage to more Americans. Controlling costs in the private insurance market is a secondary goal, and as such will have to be improved upon in the future.  Nonetheless, there are provisions in the law that will help make health insurance more affordable for poor and middle class families.

Two provisions are regulatory in nature, and will have an impact on all insured people, regardless of economic status. The third, however, is the most helpful for struggling families because it has to do with affordability support.

There are two provisions in the law that aim to control the exponential growth of premium costs in the private insurance market. These two regulations are called rate review and Medical Loss Ratio, or the “80/20” rule.  If you want to read more, click on each term to read a description of what each does. In sum, however, what these two provisions do is twofold. First, they hold insurers to a higher standard for premium increases by ensuring that the rate hikes are “justifiable.” Second, they make sure that for every dollar you (and by “you” I mean the average consumer) spend on health insurance, you get good value in actual health care. Neither of these provisions will lower premiums. Instead, they promise that premiums will rise more slowly than they have historically, and that insurance companies must spend more of the money they collect on actual health care, rather than profits. These regulations are an important first step toward reining in the explosive growth in health insurance costs.

The third provision that will help make insurance more affordable for the average citizen is something called premium subsidies. As of 2014, each state will have a health insurance Exchange, an online marketplace where you can go (if you don’t get insurance through your employer) to purchase insurance for yourself and/or your family. You’ll be able to compare, “apples to apples,” the prices, benefits, and customer support systems of competing insurance companies, and then select the plan that best fits your needs.

One benefit of these Exchanges is that people who buy through the Exchange will be eligible for significant discounts on the price of their plan, depending on their income level. Individuals earning up to 400% of the Federal Poverty Level will receive discounts on the price of their health insurance policy. For a family of four, 400% of the FPL is over $90,000 a year – so families well into the middle class will benefit from these affordability supports.

To calculate your income level and the subsidies you’ll be eligible for, click here to calculate your income and family size as a percentage of the Federal Poverty Level.

Struggling, I don’t know much about your income level or how many people you’re trying to insure, but there’s a good chance that you’ll be one of the millions of people who will see dramatic reduction in the monthly cost of their insurance premiums thanks to the subsidies. Additionally, the competitive marketplace, in combination with rate review and Medical Loss Ratio provisions in the ACA will begin to slow the speed with which health insurance costs are currently growing.

I hope this information gives you some hope for the future, Struggling. Until 2014, just hang in there with the rest of us.

To a well and healthy Texas,
Cheasty Anderson

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